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Warning: Hidden Costs of Being an Employer Ahead

Quick Look: The hidden costs of being an employer can create unexpected financial and operational headaches for small business leaders. Between health insurance premiums rising every year, coupled with a potential high price tag for compliance or benefit administration mistakes, there are unforeseen costs around every corner. But brokers who partner with a PEO can offer more lucrative, comprehensive options and solutions–helping their clients avoid these surprise expenses.

Small business owners are increasingly finding the competition for good employees to be a major challenge. Simply paying employees a good salary is expected, but it’s important to offer a solid benefits package to attract and retain their employees.

While the costs involved with offering employee benefits are a hurdle for many small- and medium-sized business (SMB) owners, brokers who work with a Professional Employer Organization (PEO) can offer their clients more comprehensive options and solutions – helping their business grow and succeed.

Benefits that Attract and Retain Employees

As a broker, you can better help SMB owners when you understand the challenges they are facing. A recent survey of 266 small business owners provided insights on many of the financial challenges facing them – including employee benefits.

The small business owners in this survey stated that health insurance was the top benefit for attracting and retaining employees. However, only 39% of business owners reported offering it as a benefit, since the average annual cost to employers is $4,142 per employee.

With the increasing importance of providing health insurance to employees, and the need to find it at a lower cost, SMB owners are looking at a multitude of options for cost-effective and broader alternatives. Brokers are increasingly offering PEO as a solution to help their clients lower health insurance costs or extend their benefits to retain employees.

Nearly half of small business owners who responded to the survey said they offered training as a benefit – at an average annual cost of $932 per employee. Training was the most frequently offered employee benefit, and the second top benefit SMB owners felt attracts and retains employees.

The third best benefit for the attraction and retention of employees is a retirement savings plan, according to the survey. However, it is also the second most expensive employee benefit offered, at an average annual cost of $3,912 per employee.

Due to the high cost, less than a quarter of small business owners said they provide a retirement savings plan. This highlights a growth opportunity for brokers who partner with a PEO – providing clients and prospects with the ability to offer perks, such as a 401(k), along with other voluntary and complementary benefits.

Two of the top three benefits that small business owners feel attract and retain employees were also the most expensive. Working with a PEO, a broker can easily help SMB owners balance the advantages and costs of providing excellent, competitive employee benefits.

Offer Low-Cost, High-Quality Employee Benefits with a PEO

The right partnership can provide tremendous value to insurance and benefits brokers who add PEOs to their list of services – especially in their ability to help reduce employee benefit costs.

First, partnering with a PEO saves brokers a massive amount of time researching insurance and benefit plans or compiling plan information. Benefit experts at the PEO are responsible for compiling tailored options for brokers to present to their clients and prospects.

Not only does it save you time, but your clients can enjoy Fortune-500 quality benefits at a much lower rate. Your clients and prospects can also take advantage of more comprehensive health benefits, such as dental and eye care. Of the small business owners surveyed, 29% said they would pay for employees’ dental insurance, if they could.

Brokers who offer a PEO as an option can differentiate themselves and stand out by providing these modern, personalized employee benefits, that better position their clients to recruit and retain top-tier talent in today’s competitive job market.

The survey also highlighted an opportunity to help business owners save money by avoiding surprises and unexpected costs. More than half of those surveyed shared they had an unexpected cost at some point, with 26% saying health insurance was a large cost that took them by surprise.

Nearly half of those surveyed also admitted to making a costly mistake when dealing with employee expenses. Most of these were penalties for mistakes associated with the Affordable Care Act and complying with COBRA, a federal law requiring employers to provide health insurance to previous employees and dependents for a certain time after leaving the company. They reported that the average cost of these mistakes was $9,967.

Working with a PEO enables a broker to offer more comprehensive services that can help SMB owners avoid these costly mistakes. In addition to benefit planning and administration, a PEO can handle payroll and tax administration, and risk and compliance services. Bringing a partner to the table that can help SMB leaders avoid costly mistakes allows business owners to focus more on growing their business, and less on managing compliance.

Growing employee benefit costs and unexpected expenses can have a significant and unfortunate impact on many small businesses. A third of the business owners surveyed said health insurance costs limited them from expanding their businesses, and 40% said their business was seriously affected by unexpected employment costs. As a result, more than half of business owners said they had to convert positions to part-time jobs. Additionally, over a third said they had to lay off staff, rely on contractors, or work understaffed – all of which have a significant impact on employee morale.

Brokers who partner with a PEO that can manage the growing complexities of human resources in today’s shifting environment don’t just provide value in the short-term, but also help to ensure the long-term success of their clients’ businesses.

Strong Employee Benefits Cultivate a Positive, Productive Workforce

SMB owners intuitively understand the advantages of giving employees great benefits, and offering them the low-cost, high-quality employee benefits a PEO offers makes you a valuable partner.

Of the small business owners surveyed, 74% said that paying the expenses of employee benefits is remarkably worth it. That’s due in part to the sense that their employees appreciate the benefits – since two-thirds of them said they feel employees very often or always appreciate the benefits they provide.

By helping clients and partners offer strong employee benefits, it demonstrates to employees the owner’s belief in their business. It shows their finances are strong, and they are investing in their business by investing in their workforce. This can have a positive impact on attracting and retaining good employees, and productivity significantly increases when businesses retain their most knowledgeable and experienced people.

The value you bring to your clients by partnering with a PEO can also mean significantly improved productivity among employees. Research from the National Association of Professional Employer Organizations (NAPEO) shows that employers who work with PEOs have considerably higher employee engagement, which ultimately boosts productivity. That strong engagement also drives outcomes that benefit both the business and its customers.

Working with a PEO to offer cost-effective health benefits is also good for the wellness of your clients’ companies. Healthy employees mean a healthier business, with less time away due to illnesses. When people don’t have to worry about affordable healthcare, saving for retirement, or other concerns employee benefits address, they can focus on the work they do. That gives them more mental energy and motivation to help your clients grow their businesses.

PEOs Offer Brokers a Solution for Cost Concerns

Employers are worried about being able to balance their ability to provide employees with meaningful benefits with the many costs involved in running a business. A PEO partnership can be valuable for both SMB owners and benefits and insurance brokers.

Brokers working with a PEO partner can provide their clients with more and better benefits at a lower cost, along with comprehensive HR services and solutions.

While some PEOs sell directly to employers, others partner exclusively with brokers to provide their solutions to clients. As a broker, it’s critical to find a PEO partner that highlights your ability to provide the local service and expertise that larger, national organizations can’t provide.

Want to find out how a PEO partner can help you offer higher-quality benefit plans? Contact ExtensisHR today to learn more about our solutions and let’s discuss how we can best serve your clients.

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